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Chapter 1: Problem 3

What is the difference between normative analysis and positive analysis? Is economics concerned mainly with normative analysis or positive analysis? Briefly explain.

Short Answer

Expert verified
Normative analysis entails value judgements, discussing what 'should' be, while positive analysis is data-driven, discussing what 'is'. Economics, while using elements of both, is mostly concerned with positive analysis, as it involves factual assessments that allow much room for objectivity.

Step by step solution

01

Definitions

Normative Analysis discusses statements that belong to the realm of opinion, belief or values. It focuses on what 'ought' to be or what 'should' be. On the other hand, Positive Analysis involves statements and theories that can be tested, either by examining the available evidence or by creating experiments to test the validity of the hypotheses. It describes what 'is', and relies on verifiable empirical data.
02

Differential Traits

While normative assertions are value judgements and subjective by nature, positive assertions are factual and objective in nature.
03

Role in Economics

Economics encompasses elements of both positive and normative analysis. However, it is often laid emphasis that economists should primarily utilize positive analysis since it deals with factual and data-driven assessments, leaving values and norms for policymakers and society to determine.

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